BSEC to allow listing of loss-making startups with high business potentials

​The Bangladesh Securities and Exchange Commission has initiated a move to allow listing of loss-making startups having high growth potentials on the stock market.

The stock market regulator is working to amend the Qualified Investor Offer by Small Capital Companies Rules, 2018 to allow startups which are now making losses but having high potentials of business growth to be listed on the country’s stock exchanges.

According to the current rules, a company needs to have the net profit after tax at least for preceding two financial years if it offers its securities above par value.

It would be the first approach from the BSEC to list loss-making concerns on the country’s capital market.

BSEC commissioner Shaikh Shamsuddin Ahmed told New Age on Monday that the regulator was working to bring to the market startup companies having high business potentials but now are making losses.

Most of the startup firms are loss-making entities, but many of them have huge business potentials, he said.

Technology companies cannot be evaluated through traditional methods, he said.

‘We are working to set a new valuation method to value the technology-driven startup firms,’ he said.

The valuation would depend mainly on the companies’ business prospects as the technology-driven companies have seldom physical assets to value, he said.

Shamsuddin said that it was a very challenging job for the BSEC to create a method which could evaluate the companies’ potentials.

Finding reliable financial documents of a company in the country could be another challenge for the regulator, he said.

BSEC executive director and spokesperson Rezaul Karim said that the regulator would hold a public hearing on the proposed amendment to the SME rules soon.

After the public hearing, it the amendment would be finalised and published, he said.

In the SME rules, there would be a separate provision for the startups with various exemptions from the current rules and flexibilities for being easily listed, he said.

During valuation of a startup, the regulator may consider the company’s past performance, examining the expected long-term development of the company’s markets, the potential size of the market and the company’s market share as well as the level of returns on capital the company might be able to earn, BSEC officials said.

The regulator may also consider different probability-weighted scenarios as long-term projections are highly uncertain for startups.

Earlier in March 2021, 12 startup firms, including Sheba.xyz and Chaldal, held a meeting with the securities regulator and expressed their interest to be listed on the market.

Shahidul Islam, chief executive officer of VIPB Asset Management, said that profitability of a company should not be a must to be listed on the stock market.

The regulator should give more emphasis on the companies’ governance, transparency and potentials, he said.

Source : ​newagebd